New Developmentalism: development macroeconomics for middle income countries

January, 2019

This article resumes New Developmentalism - a theoretical framework being defined since the early 2000s to understand middle-income countries. It is constituted of a political economy and development macroeconomics and originated in development economics and post-Keynesian macroeconomics. From the start, it is an open and development-oriented economics. New Developmentalism focuses on two macroeconomic accounts, the fiscal and the current accounts, and in five macroeconomic prices which the market is unable to keep "right". It affirms that the exchange rate tends to be cyclically overvalued, thus making the competent companies non-competitive and leading the economy to go from crisis to crisis, to the extent that countries are irresponsible in fiscal terms and search to grow with foreign indebtedness. New Developmentalism has a new definition of Dutch disease, and a means to neutralize it. Counterintuitively it argues that middle-income countries should reject. external finance and balance the current account.  
 

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